The Bank of Korea said Monday it has agreed with Switzerland’s central bank to extend their bilateral currency swap arrangements for another five years, as part of a move to further bolster financial cooperation.

The currency swap deal totaling at 11.2 trillion won ($10.1 billion), which was set to end on Monday, will last until March 2026, according to the BOK.

“The extension of the currency swap deal aims to enhance bilateral relations in the area of finance and to strengthen function of the two countries’ financial markets,” it said in a statement. 

Given that Switzerland is one of six key currency regions, along with the United States, the eurozone, the United Kingdom, Canada and Japan, the swap agreement will provide a safety net for South Korea’s financial market in times of foreign exchange crisis, it added. 

A currency swap is a transaction, whereby two parties such as banks or countries exchange an equivalent amount of money with each other but in different currencies to manage possible exchange rate risks.

As of today, Asia’s fourth-largest economy has currency swap contracts with eight major economies -- the US, China and Canada, Switzerland, Australia, Malaysia, Indonesia and the United Arab Emirates -- which amounted to $196.2 billion in total, data showed.

By Choi Jae-hee (cjh@heraldcorp.com)